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Apple Drops Skyhook Wireless Technology From iPhone

Skyhook is still confident about the technology it can provide to wireless carriers.

When it comes to mobile software and devices these days, it's all about location, location, location. And if you're a small, leading-edge company in the sector -- if you've played a pioneering role in bringing location-based technologies to market, and millions of devices use your software -- well, you'd better watch your back.

That's my take upon hearing the latest news from Boston-based Skyhook Wireless, the geo-location software firm. Yesterday, after a tumultuous few days in which the company acknowledged that Apple(Nasdaq: AAPL) is no longer using Skyhook's location-aware software in its new iPhones (since April) or the iPad, Skyhook announced it has been granted four new U.S. patents in Wi-Fi location and positioning technology.

It's an interesting juxtaposition of events. On one hand, Apple is one of Skyhook's biggest and most prominent customers. When Steve Jobs announced on stage at MacWorld in January 2008 that Skyhook's technology would be part of a big iPhone software upgrade, Skyhook founder and CEO Ted Morgan called it "probably the biggest publicity event any company can have." So it's surely a serious blow to be dropped from these hot new devices. Apple apparently has its own Wi-Fi location information, presumably culled from the daily movements of iPhones around the country, that it thinks is good enough for its own devices. On the other hand, Skyhook is projecting confidence in its core technologies and, in any case, seems to be digging in for a fight to supply these technologies to more and more mobile manufacturers.

Following various media reports from TechCrunch (which first reported on the Apple and Skyhook angle last week), the Wall Street Journal, and other media outlets, I wanted to hear what Skyhook had to say about the current situation, and about the evolving competition in location-based services -- and how it affects Skyhook's strategy. (All of this originally came about in response to a query about privacy made to Apple from a pair of U.S. congressmen, one from Massachusetts.)

First, some more background. Skyhook has been a darling of the Boston-area mobile software scene for a few years now. Its software determines a mobile device's precise location based on the identities and locations of nearby Wi-Fi networks, and information from GPS satellites and cellular networks. The core technology is deployed on mobile devices made by Samsung, Motorola(NYSE: MOT) (Android phones), Dell(Nasdaq: DELL), Qualcomm(Nasdaq: QCOM), and Texas Instruments(NYSE: TXN), among others -- including Apple's iPhone and iPod Touch from 2008 until just this spring.

Meanwhile, Skyhook's intellectual property -- which now comprises 15 granted patents and 37 pending applications -- falls into three main categories: building a Wi-Fi database for location, maintaining that data (which is challenging because Wi-Fi access points move around), and ensuring the highest accuracy possible through proprietary algorithms.

"We were the first ones to do all this," says Skyhook's Morgan. "The downside of being early is you have to wait seven years for stuff to come to market."

And, as many tech pioneers have found out the hard way, being early isn't necessarily an advantage for long. "There's a huge platform war breaking out," Morgan says. "Location infrastructure is a big part of the mobile chess game." Not surprisingly, he insists that Skyhook's system "is still the best in the world."

Clearly, Apple is trying to own every component of mobile technologies, including location. But Morgan confirms that Apple "remains a Skyhook customer." That means older iPhone models still run Skyhook's software, but it also means Apple continues to have a license to use the technology across all of its products. "We're still the main guys driving this. We'd love to say we're on every Apple device ever, but we can't," Morgan says.

The Skyhook founder downplays the effect the Apple news will have on the company's other partnerships, but he acknowledges that mobile firms are all looking at their options when it comes to location technology. "This is validation of what we've been saying for seven years," Morgan says. "Location is going to be key for mobile. And mobile is the big growth area in tech ... Boston has a good foothold in the core pieces of mobile and location [technologies]. We'll see how it all plays out."

On the intellectual property front, Morgan declined to comment when I asked him whether it's conceivable that Skyhook would take Apple (or others) to court over patent infringement. He did say that Skyhook has "never engaged in any litigation."

Lastly, I asked about the company's prospects for the next year or so, as the location competition in mobile software heats up further. Morgan declined to give any stats on company revenues or growth, but Skyhook currently has 35 employees, and the company says its software is deployed on tens of millions of devices around the world and powers thousands of mobile applications.

It sounds like the company's main focus -- now more than ever -- is to get out there on more smartphones and other devices. "We've signed the biggest consumer electronics companies in the world," Morgan says. "As they invest more in mobile, the trajectory is all up. Hopefully you'll see more devices with Skyhook on them out in the market."